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Factors Affecting The American Dollar |
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Federal Reserve Bank (Fed): The American central bank has full autonomy in setting monetary policy. Its principal policy signals are open market operations, the discount rate and the Fed Funds rate.
Federal Open Market Committee (FOMC): Responsible for making decisions regarding monetary policy, including the decisive interest rate announcements it makes eight times a year.
Fed Funds rate: The most important of all American interest rates, this is the rate that depository institutions charge for overnight loans. The Fed announces changes in the rate when it wishes to send clear monetary signals to the market and these announcements typically have a major impact on all stock, bond and currency markets.
Discount rate: Largely viewed as symbolic, this is the interest rate at which the Fed charges commercial banks for emergency liquidity. Changes in the discount rate imply clear policy signals.
30-Year Treasury Bond: A benchmark asset-class, the long bond is normally impacted by shifting capital flows triggered by a range of considerations, such as financial and political turmoil in emerging markets, thus helping the dollar. This is perhaps the most important indicator of the market’s anticipations re inflation.
10-Year Treasury Note: The foreign exchange markets usually refer to the 10-year note when comparing its yield with that of bonds overseas. A higher American yield typically benefits the dollar against foreign currencies.
Treasury: The Treasury is responsible for issuing government debt and for making decisions on the budget. The Treasury has no control over monetary policy, but statements on the dollar have significant influence on the currency.
Economic data such as:
1. Labor report
2. Consumer Price Index
3. Producer Price Index
4. Gross Domestic Product
5. International Trade
6. NAPM
7. Housing starts and housing permits
8. Industrial Production
9. Consumer confidence
Stock Market: The three major stock indexes are the Dow Jones Industrial Index (Dow), S&P 500 and NASDAQ, with the Dow being the most influential on the dollar. The three factors affecting the indexes are corporate earnings (both forecast & actual), interest rate expectations, and global considerations.
Cross-rate Effect: The dollar’s value against one currency is sometimes affected by another currency that may not involve the dollar.
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| Symbol |
Rate |
| GBP:CHF |
2.007608 |
| GBP:JPY |
182.222212 |
| GBP:USD |
1.757198 |
| NZD:USD |
0.658397 |
| EUR:CAD |
1.503413 |
| EUR:CHF |
1.557680 |
| EUR:GBP |
0.775889 |
| EUR:JPY |
141.384148 |
| EUR:USD |
1.363390 |
| AUD:JPY |
80.415028 |
| AUD:USD |
0.775455 |
| USD:CAD |
1.102702 |
| USD:CHF |
1.142505 |
| USD:JPY |
103.700427 |
| USD:SEK |
7.185028 |
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Disclimer: This website is for informational purposes only and is not intended to provide
specific commercial, financial, investment, accounting, tax, or legal advice.
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© ForexCenter.com, 2005, All Rights Reserved
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History
